ThetaMatrix BW

The Elite Algo

A Summary

The Elite Algo is a conditional probability algorithm which produces “long” signals for the S&P 500, Nasdaq composite, and volatility indices. It has been thoroughly back tested and the resulting P/L graphs can be seen below. Just like with any system it has losing trades but on a long enough time horizon (and more importantly with enough occurrences) it has been proven to be a winning strategy. The Elite Algo is meant for entertainment purposes only and is not a recommendation to buy or sell a security.

The Elite Algo is programmed specifically to “buy the dip” and will never provide a short signal. It takes positions directly via the underlying.

Who runs the algo?

The Elite Algo is a software program constantly running; not operated by a human. There is no one deciding whether or whether not to send a signal. If the algorithm determines the necessary factors have been met a signal will be sent. This eliminates the possibility of emotions having any effect.

The Elite Algo has no mind of it’s own and only seeks to profit from the swings in the markets. It has no personal objectives or motives, it only knows how to hunt; like a terminator.

What causes the algo to take a position?

The parameters necessary to create a signal is proprietary information owned by Theta Warrior. Like any algorithm, it is a mathematical formula composed of different circumstances that must be met (if yes, then..) which causes an alert to fire. Due to this strict process, the Elite Algo takes a sporadic number of positions per year and does not trade intraday or daily. Minimum requirements for a signal:  




Edge Ratio or E-Ratio measures how much a trade goes in your favor vs. how much a trade goes against you.

CPC: Win percentage multiplied by ratio WL multiplied by profit factor.

PNLDD: Profit to Drawdown ratio.

How to properly use the algo

There are many ways to utilize the Elite Algo and each trader will likely have a different approach. Some traders may follow in and out exactly as the algo does, while others may prefer to use it as a secondary confirmation to a bull/bear thesis. Both are viable strategies.

It is important to understand that the algo typically stays in a trade for a set amount of time, no matter how far price may move in the profit or loss zone during the course of the trade. This can be detrimental for a trader if proper risk management and take-profit parameters are not taken. For example; if the algo gets long the SPY at 450 and the very next day SPY climbs to 455, the algo will not take profit until the entirety of the trade has run its course. A diligent trader in this scenario may want to consider taking profits/securing gains as the trade is working. In the above scenario following the signal, SPY may dip to 435 and then climb back up over the next few days until the algo ultimately closes the position at SPY 454. This is a win for the algo but would likely not be a winning trade for the options trader that held through the entirety of the signal.

It is critical to apply proper risk management at all times, no matter what the situation is. The Elite Algo is meant to be a tool to complete a trader’s own analysis.

Algo Reference Names

  • Layla – SPY (S&P 500 ETF) Long
  • Lucy – ES (S&P Futures) Long
  • Rebecca – QQQ (Nasdaq ETF) Long
  • Monica – NQ (Nasdaq Futures) Long
  • Henry – VIX (Volatility Index) Long
  • Diego – VVIX (Volatility of the VIX) Long
The Terminator

Layla –  SPY (S&P 500 ETF)

Average Hold Period: 2.5 days

Percent Profitable: 72.08%

Profit Factor: 2.32


Lucy –  ES (S&P 500 Futures)

Average Hold Period: 8 days

Percent Profitable: 67.27%

Profit Factor: 2.36


Rebecca – QQQ (Nasdaq ETF)

Average Hold Period: 4 days

Percent Profitable: 67.19%

Profit Factor: 2.18


Monica – NQ (Nasdaq Futures)

Average Hold Period: 2 days

Percent Profitable: 77.53%

Profit Factor: 3.94


Henry – VIX (Volatility Index) 

Average Hold Period: 7.5 days

Percent Profitable: 60.44%

Profit Factor: 2.74


Diego – VVIX (Volatility of the VIX) 

Average Hold Period: 7.5 days

Percent Profitable: 64.90%

Profit Factor: 3.46


Delta Smash Algorithm